By 2018, expect a more challenging profit environment across the US meat industry

Consumer Meat Prices Expected to Dip

With the protein supply in the midst of one of the largest increases in US history, Rabobank expects consumers to enjoy a noticeable amount of relief in the form of lower meat prices, especially beef and pork.

Meat prices have more than caught up with the increases in feed costs, and with more beef, pork and chicken supply on the horizon, the question is only to what degree prices will fall in the coming years. According to Rabobank, expect the following:

US retail meat prices to decline by 14 per cent by 2018, from 2015 levels on a consumption-weighted basis, with beef prices being the major driver

Beef prices to see the largest deflation at retail at 22 per cent

Pork prices to decline 7 per cent

Chicken prices to decline 5 per cent

Opportunities in Animal Protein

With US protein production growth looking to continue at a substantial rate of 2.5 per cent per annum, protein exports face numerous challenges and will struggle to keep up with this growth, suggesting an increase in domestic protein disappearance.

Uncertainty over additional growth opportunity for domestic animal protein after consumption increased in 2015 by 5 per cent

Producer markets are expected to be positive in 2016 and possibly even in 2017

By the end of 2018, profits are expected to slide lower

Despite the outlook for more challenging conditions, Rabobank foresees five paths to success for US animal protein companies, which are listed and detailed below. The turning of the cycle will bring with it a number of strategic pressures for further industry consolidation.